Podcast Summary
Investing for grandchildren's future: Consider a child trust fund for tax-efficient, long-term investment growth for grandchildren, but remember all investments carry risks and past performance isn't indicative of future results.
For those looking to invest for their children, a child trust fund is a tax-efficient option. At Blue Nile, you can find beautiful lab-grown diamonds for your special moments, while Mint Mobile offers affordable wireless plans. Michael, a Feet Money Show listener, asked about investing for his grandchildren. With 13 grandchildren, he wanted to find a simple and tax-efficient way to grow their funds. Malcolm Cuthbert, managing director of financial planning at Killick and Co, advised that a child trust fund is the most tax-efficient way to invest for children. Despite the initial setup costs and potential annual fees, the long-term gains can outweigh the costs. However, it's essential to remember that all investments come with risks, and past performance is not indicative of future results. It's crucial to consider your financial situation, investment objectives, and risk tolerance before making any investment decisions.
Tax-efficient ways for saving for grandchildren: Grandparents can use child trust funds, bear trusts, pension contributions, or children bonds for tax-efficient savings for their grandchildren. Each method has its advantages and limitations.
Child trust funds offer tax efficiency for saving for children, with no capital gains or income tax. However, they have limitations on the amount that can be put in. For children who don't qualify for child trust funds, a simple bear trust can be an effective alternative. In a bear trust, the grandfather, as the settlor, will not have any income tax liability. The capital gains tax liability falls on the child, who has a normal capital gains tax allowance. Another tax-efficient option is contributing to a pension for the grandchildren, which offers tax relief on contributions. Michael, for instance, could make a contribution of £25 per annum for each grandchild and receive tax relief on it. National Savings and Investments, which allow tax-free investments of up to £3,000 in children bonds, is another alternative worth considering. Overall, these tax-efficient methods can help Michael provide financial security for his grandchildren.
Investing in children's futures through tax-efficient methods: Investing in children's ISAs or pensions can lead to substantial returns over time due to tax relief and compound interest.
Investing in children's futures through tax-efficient methods, such as pension contributions or ISAs, can yield significant returns over time. Malcolm Cuthbert from Killick and Co suggested this strategy for Michael, who has numerous grandchildren. By making small contributions now, the compound effect of the investments, combined with tax relief, can result in substantial growth by the time the children reach retirement age. Cuthbert also recommended considering ISAs for children once they reach the appropriate age. While children cannot open an ISA until they are 16 for a cash ISA and 18 for a stocks and shares ISA, moving funds from a child trust fund to an ISA when it matures at 18 can be advantageous. As a personal example, Cuthbert shared that he had invested £100 each in ISAs for his 11 nephews and nieces, which cost him only £80 each due to tax relief. This investment could potentially grow significantly by the time they reach retirement age. In summary, investing in children's futures through tax-efficient methods, such as pension contributions and ISAs, can lead to substantial returns over time. This strategy can be a thoughtful and meaningful way for Michael, or anyone else, to provide for their loved ones' financial future.
![#47 - [Express] How to choose the perfect super fund](https://www.podcastworld.io/podcast-images/mo-money-0wd1nqt9.webp)